India keeps world guessing in countdown to landmark trade deadline

SYDNEY/NEW DELHI (Reuters) - India will firm up its position regarding a landmark global trade pact shortly before a Thursday deadline, a senior official said on Monday, setting up a nail-biting showdown over a deal it says should safeguard a $12 billion anti-poverty food program.

India is the most prominent of a group of developing nations angry with rich countries for failing to address their concerns about a deal on trade facilitation struck by WTO member states in Bali, Indonesia, last year.

While in opposition, newly elected Prime Minister Narendra Modi’s pro-business, nationalist party opposed the Bali deal, saying it was skewed in favor of developed nations.

That position appears to have been reflected in a tough negotiating stand since Modi took office in May.

Proponents believe the deal could add $1 trillion to global gross domestic product and 21 million jobs by slashing red tape and streamlining customs, eliminating delays at the border that can often cost more than tariffs themselves.

But India is seeking a change in WTO rules regarding its roughly $12 billion annual food subsidies, and is worried that the agreement as it stands does too little to guarantee that.

Several African nations are worried the deal will expose them to a flood of imports from developed countries, and want concrete assurances they will get something in return.

A failure could prove disastrous for the moribund World Trade Organization (WTO) and the system of global free trade deals it underpins.

On Monday, the official said New Delhi and other emerging market governments needed a guarantee that developed nations would meet their side of the bargain and wanted to see a framework to address those concerns.

“We have experience in the past that once the deal is signed, developed countries just forget about concerns of the developing world,” the official told reporters, speaking on condition of anonymity.

Since the deal was struck in Bali, the official said, WTO discussions had focused almost entirely on trade facilitation with no talks on the subsidy issue.

The official said India would “firm up” its position at a cabinet meeting headed by Modi in the next two days, before WTO members meet on July 24-25 in Geneva to agree on the trade facilitation protocol.

FACE-SAVING

As late as Sunday, hopes were high that publicly addressing Indian concerns during a G20 Trade Ministers meeting in Sydney this past weekend would give it a face-saving path towards reaffirming its assent before the July 31 deadline.

India stockpiles food for its poor, citing the need for food security, but doing so puts it at risk of breaking the rules of the WTO which worries that the stockpiling of subsidized food can distort trade.

In Bali, WTO members agreed to give India a pass on its stockpiles until 2017, while negotiating a permanent solution.

Officials told Reuters that India had not supplied any clear indication of concessions it wanted, so attempts were made at the meeting to reassure it that its concerns, whatever they may be, were being heard.

“India clearly and forcefully expressed its concern that work proceed on all fronts, including food stockpiling, and received assurances that all G20 members are committed to the full implementation of all Bali agreements on the agreed timetables,” U.S. Trade Representative Michael Froman told Reuters on Monday.

‘MAIN CONCERN’

A confidential “Summary of Discussion” circulated to G20 participants by Australian Trade Minister Andrew Robb obtained by Reuters details what one official said was an example of India winning acknowledgment of its concerns.

The document notes that specific Indian concerns about the deal were raised by the members and pledges to work constructively this week to address those issues.

But India protested after Robb’s final speech, saying he did not reflect India’s specific food security concerns and issues raised by developing nations, the Indian official said.

In principle, the WTO could pass the agreement on the basis of a qualified majority, but experts say that would be unprecedented and virtually impossible in an organization that operates on consensus.

“India is quite influential, so let’s hope that they’re going to back down in some way,” Peter Gallagher, an expert on free trade and the WTO at the University of Adelaide, told Reuters.

U.S. lawmakers said India’s credibility was on the line. “If India wants to be respected as a responsible and co-equal partner in global trade, it must ensure that it keeps the commitments it has already made without qualification,” said Republican Devin Nunes, who heads a trade panel in the U.S. Congress.

One official involved in the negotiations, speaking on condition of anonymity to speak frankly, said an Indian warning that it may not extend support within the set deadline was emblematic of “erratic” Indian behavior over the deal.

The row over subsidies has raised fears that the agreement, the first ever global trade agreement under the WTO, will be derailed. The deal was only reached after New Delhi extracted promises that its concerns about food subsidies would be addressed.